36 Responses to “Thoughts on President Obama’s SOTU Call for a $9 Minimum Wage”

I just have to say I love the heliotrope jacket. Unless of course that was really a grey suit and you have some great lighting effects happening there.

Look I can see two factors that you have not covered in your argument, the first of which is uncertainty.

A lot of employers can’t really say for sure what every employee is worth to them on a per-hour basis (and maybe it changes in real terms from day to day depending on circumstance). So with some uncertainty in play, maybe employers will end up hiring the guy anyhow because the job does need to get done, so someone has to do it.

The other (much more complex) factor is that in the USA, illegal immigrants have for decades been used as a way for business to secretly hire at lower than minimum wage. Obama’s platform has been around the concept of bringing illegal immigrants onto the path to legitimate citizenship and frankly it would be enormously difficult for any President to stand up and demand these people get hauled over the border after they have spent so many years living in the USA.

Thus the higher you make the minimum wage, the more attractive it is for business to hire illegally and that’s a whole can of worms. Probably topic for a huge discussion. I’m not condoning illegal behaviour, the fact is it happens, and economics has to deal with what happens, not make believe.

Thus the higher you make the minimum wage, the more attractive it is for business to hire illegally and that’s a whole can of worms.

Austrian Economics taught me that there is no harm done to us as Americans if illegal aliens take jobs here, so I no longer believe they’re taking “our jobs”.

As well, though – and this pertains to the legitimacy of the term “illegal alien” – I learned that there’s no such thing as a “public good”; that “the People”, “the government”, or “the collective” cannot actually own property – only individuals can own property.

The reason is that since no one is entitled to the labor of another person, then unless a resource is actually owned by a specific person, then no one has a right to prohibit someone from claiming it.

What that means is that it’s wrong for the government to keep anyone off of a commons, and that “the government” has no claim to, say, national parks and such.

So, I also no longer think that foreigners can cross the US border and be considered illegal in the sense that they’re trespassing.

But I will quickly add that since citizenship is not a resource, but an agreement between specific individuals, that no one has an inalienable right to be a citizen.

So, whatever places are a commons in the United States, I cannot object to foreigners (or Americans) homesteading them.

You are effectively saying that national borders simply don’t exist. Also saying that most national laws don’t exist, other than a limited subset of property law.

In that case, suppose Russia or China just happened to decide to march a load of armed troops right through the USA… you know, for homesteading the commons and all that. You would be cool with that?

The commons such as they are also exist by agreement between a group of people, just the same as citizenship. It is a property right, and it has already been claimed, it is simply administered on a shareholding basis rather than one single owner. So the park down the road from my house is a nice place to go for a walk, and take kids to play, and all the neighbourhood own it, and we all vote for (and pay for) a council to look after it. I’m not about to stand by and let people “homestead” that space thus depriving me (and others) of utility.

Let me put that a different way, suppose the same park was held by a registered corporation and all the neighbourhood had documented shares in that corporation. Would that create a tangibly different property right in your eyes?

I get what you’re trying to say, but as Rothbard points out, the shareholding analogy is a poor one, since you can sell stocks, but you can’t go out and find your, let’s say, acre of land, and sell it to someone else.

Let me put that a different way, suppose the same park was held by a registered corporation and all the neighbourhood had documented shares in that corporation. Would that create a tangibly different property right in your eyes?

That would be different, yes; Not because a bunch of people jointly own it, but because SPECIFIC people own it.

The contract in this case would be between specific, named, individuals; as opposed to so-called “public land” where someone cannot refuse to accept “ownership” of it and thereby reduce his taxes.

You are claiming that the United States does not keep lists of citizens by name? I find that hard to believe.

In Australia we have tax file numbers, electoral rolls, birth certificates, documentation as to who owns land, and who leases land, government medical numbers, and probably a bunch of other stuff held by the police and security forces. They are very specific indeed.

… where someone cannot refuse to accept “ownership” of it and thereby reduce his taxes.

Well ability to refuse is a fair point, but anyone can reduce tax by simply not working, or they can relinquish citizenship and leave if they get a better offer elsewhere.

One could argue that citizenship is not transferable and cannot be re-sold, but that also applies to a bunch of other things. When you buy software for example, there is a specific EULA where you agree by contract that this software cannot be resold. Corporate mergers cannot arbitrarily proceed, they must be approved by the regulatory authorities first. If I buy one of those fancy educations I keep hearing about, then surely I purchased something for the money, but I can’t just transfer my bran new brain to anyone else.

There’s lots of examples of things we regard as property that cannot be transferred (or maybe only in very limited ways). Personally I don’t have a problem with people selling their citizenship on eBay, but that’s beside the point.

Seriously though, this just illustrates why econometrics fails on so many counts. They are trying to measure something unmeasurable. They cannot possibly account for every variable; they cannot even be sure they are accounting for most variables or the most important ones. The only way an increase in the minimum wage would have no effect on unemployment would be a situation where every single individual previously under the new minimum wage happened to have a contribution over the new minimum wage. It’d be absurd to assume this, with the enormous range and variety of working individuals in our society.

But even this is too simplified. It’s not just diversity in the productivity of individuals at one point in time. It’s the diversity in the productivity of individuals at all points at time. As people’s skills change, temporary and sometimes permanent (and of course, any possible range of time in between) situations are likely to come about where an individual’s productivity is over the old minimum wage, but under the new one. And thus the increase in the minimum wage is what puts him out of work.

The methodology of econometrics is simply too flawed for the science of economics, in which human action, choice, preference, productivity, objective circumstances, etc. are not only sometimes unmeasurable, but constantly changing.

This is absurd. Just as one example you don’t need to look at EVERY case to test a claim that it SOMETIMES eliminates a job. I don’t need to test every driver or every drinker to know drunk driving causes accidents. And human physiology is complex too Bharat.

Ok, you’re right, I think I should clarify. The reason I’m criticizing econometrics is because I believe a better method of economics exists: praxeology. My criticisms of econometrics are because it pales in comparison in discovering causality. It leads people to absurd conclusions as in the case of the minimum wage.

So you’re right about empirical methods in learning about human physiology. Certainly they will reach absurd conclusions as well from time to time (maybe just as often or more often, but who knows?). However, no better method exists (at least that I know of).

(1) the reason it is $9 and not $100 is that the *minimum* wage is a floor concept, not a ceiling.

(2) the moral issue: it is the wage below which people start to really struggle to live: they face life below the poverty line or at that line. How can you expect them to live properly, eat properly, raise children, when their income is insufficient to meet basic expenses? The real (inflation-adjusted) minimum wage has fallen below the poverty line.

(3) first economic argument: the law of demand is not universally true, certainly not in the real world. That is why your main argument does not work. There is no reason why wage rises must necessarily cause unemployment.

A Keynes pointed out, the labour market is highly unusual: people’s wages are also income, and income is spent on output. Demand drives output. Even if we assume *some* unemployment from wage rises, it is more likely that extra demand will swamp that and make it insignificant (especially with countercyclical Keynesian fiscal policy).

If you do not believe that, then why in the classic era of Keynesianism when the minimum wage was generous and real wages constantly rising did we have very high employment?

(4) second economic argument: the reason it is $9 and not $90 is that excessive wage increases can feed into cost push inflation – wages being a big factor in input costs. In the Post Keynesian tradition, there has always been concern that wages should not rise excessively over and above productivity growth, or feed into wage-price spirals. Supply shocks in other commodity factor inputs can lead to wage-price spirals and stagflation (as in the 1970s).

“(1) the reason it is $9 and not $100 is that the *minimum* wage is a floor concept, not a ceiling.”

So? the question that needs to be asked is “why shouldn’t everybody be making 100 dollars an hour?”

“(2) the moral issue: it is the wage below which people start to really struggle to live: they face life below the poverty line or at that line. How can you expect them to live properly, eat properly, raise children, when their income is insufficient to meet basic expenses? The real (inflation-adjusted) minimum wage has fallen below the poverty line.”

I wonder why someone would make an emotionally based argument towards an economics based question. that said, these people who are struggling to live would be even better with a 100 dollar minimum wage, would they not?

“(3) first economic argument: the law of demand is not universally true, certainly not in the real world. That is why your main argument does not work. There is no reason why wage rises must necessarily cause unemployment.”

would it do so for a 100 dollar minimum wage? why wouldn’t it do so for a 9 dollar minimum wage. as Murphy said in the video, the principle is the same, the only difference is that the effect would be smaller.

also, the law of demand is not universally true? maybe not for luxury goods, but for goods that ordinary people buy, it sure is true. do you go to a store wanting to get ripped off?

“A Keynes pointed out, the labour market is highly unusual: people’s wages are also income, and income is spent on output. Demand drives output.”

yes, the labour market is completely unlike every other market, where the money spent just sits around and doesn’t get used producing outputs.

“Even if we assume *some* unemployment from wage rises, it is more likely that extra demand will swamp that and make it insignificant (especially with countercyclical Keynesian fiscal policy).”

well, as you said about Murphy’s argument earlier, this is not universally true, so I can ignore this entire argument.

“(4) second economic argument: the reason it is $9 and not $90 is that excessive wage increases can feed into cost push inflation – wages being a big factor in input costs.”

you forgot the second half of your argument, which is that a $9 minimum wage would not push inflation. after all, wages are a big factor in input costs, trigger wage-price spirals, and stagflation. but lets grant you that point, you still haven’t made a good argument as to why the minimum wage would be a good thing, just why it might not be a bad thing.

so, you are denying your entire argument, which was “(3) first economic argument: the law of demand is not universally true, certainly not in the real world. That is why your main argument does not work. There is no reason why wage rises must necessarily cause unemployment.”

which in of itself doesn’t follow, as the law of demand says what happens to prices, whereas your conclusion is about employment levels.

“the law of demand is not universally true? maybe not for luxury goods”
With certain luxury goods price is itself considered a quality of the product. This means a different price can make it a different product so to say, and ceteris paribus conditions are violated.

(2) the moral issue: it is the wage below which people start to really struggle to live: they face life below the poverty line or at that line. How can you expect them to live properly, eat properly, raise children, when their income is insufficient to meet basic expenses?

1 is a classic non denial denial answer LK. I apply to be a cop and learn the minimum height is 13 feet tall. I say ” that minimum height requirement means you cannot hire anyone” and you reply “it’s a minimum height requirement, not a maximum one, duh.” Silly.

The reason it is $9 and not $90 isn’t a floor vs. ceiling concept or the specter of a cost-push inflation cycle. It’s the widespread acknowledgment that such a legal minimum would destroy the labor market in one fell swoop.

Of course he did Gene. The reason is that the causal mechanism is the same. After all the $100 an hour argument is directed at gaps and shortcomings in your argument. In the water example we have conflicting effects. In the wage we have the same causal effect, a disincentive.

I don’t think that’s a good analogy. If a worker gets paid $9/hr instead of $7/hr, that worker is better off ceteris paribus. If a worker gets paid $100/hr instead of $9/hr, they are even better off. The problem comes if they get laid off, or if the purchasing power of the dollar falls, not from the actual wage itself.

Bob, if 8 glasses of water is good for you, why isn’t 800 even better?! (By the way, water is a poison at that level.)

Wouldn’t you be richer if you didn’t have to pay for your next 792 glasses of water?

The reason there are wages at all is because someone thought they could satisfactorily increase their with employees. They don’t have to hire anyone, if they don’t want to.

And if employers can only satisfactorily increase their wealth with employees at a certain wage, then attempting to use force to raise that wage is going to reduce production, or they must consume some other store of wealth and their costs will increase, because the whole point of trading is to make a profit (even if that profit is in terms of some spiritual ideal).

By granting the government the power to set wages at $9 an hour, you have granted the government the power to set wages at $20, $30, $60 or $100 an hour. Governments have been known to set high wages for the benefit of white union members in the US and for the benefit of whites in South Africa. As “progressive” Glenn Greenwald explains regarding Obama’s power to “murder by whim”:

What this DOJ “white paper” did was to force people to confront Obama’s assassination program without emotionally manipulative appeal to some cartoon Bad Guy Terrorist (Awlaki). That document never once mentioned Awlaki. Instead – using the same creepily clinical, sanitized, legalistic language used by the Bush DOJ to justify torture, renditions and warrantless eavesdropping – it set forth the theoretical framework for empowering not just Obama, but any and all presidents, to assassinate not just Anwar Awlaki, but any citizens declared in secret by the president to be worthy of execution. Democratic Rep. Barbara Lee wrote that the DOJ memo “should shake the American people to the core”, while Harvard Law Professor Noah Feldman explained “the revolutionary and shocking transformation of the meaning of due process” ushered in by this memo and said it constituted a repudiation of the Magna Carta.

In doing so, this document helpfully underscored the critical point that is otherwise difficult to convey: WHEN YOU ENDORSE THE APPLICATION OF A RADICAL STATE POWER BECAUSE THE SPECIFIC TARGET HAPPENS TO BE SOMEONE YOU DISLIKE AND THINK DESERVES IT, YOU’RE NECESSARILY INSTITUTIONALIZING THAT POWER IN GENERAL. That’s why political leaders, when they want to seize extremist powers or abridge core liberties, always choose in the first instance to target the most marginalized figures: because they know many people will acquiesce not because they support that power in theory but because they hate the person targeted. BUT IF YOU CHEER WHEN THAT POWER IS FIRST INVOKED BASED ON THAT MENTALITY – I’M GLAD OBAMA ASSASSINATED AWLAKI WITHOUT CHARGES BECAUSE HE WAS A BAD MAN! – THEN YOU LOSE THE ABILITY TO OBJECT WHEN THE POWER IS USED IN THE FUTURE IN WAYS YOU DISLIKE (OR BY LEADERS YOU DISTRUST), BECAUSE YOU’VE LET IT BECOME INSTITUTIONALIZED. [emphasis added]

Likewise, for a minimum wage, you can first apply it to the saddest of sad sack cases. Once you have institutionalized $8 or $9 an hour as a minimum wage subject to state punishment, you have established the legal precedent for a $25 or $35 per hour require even if enacted for nefarious purposes.

And all to solve a “problem” that does not exist but for prior progressive “solutions”.